JPMorgan believes China and Hong Kong are the first markets to enter a tradable policy-and-AI-infrastructure theme phase
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JPMorgan believes China and Hong Kong are the first markets to enter a tradable policy-and-AI-infrastructure theme phase
This report compiles JPMorgan's initial coverage on China and Hong Kong, with emphasis on data center-driven demand for power equipment, CATL's acquisition of a stake in VNET to advance the AIDC energy-storage ecosystem, and the latest views on internet, logistics, auto exports, and securities.
- Asia power equipment companies are up more than 60% on average year to date, and the market has already largely reflected expectations for strong first-quarter orders and data center capacity growth.
- JPMorgan remains constructive on order growth, margins, and demand prospects, but after the rally it has shifted to a more selective stance, favoring China power equipment mid- and small-cap names.
- CATL's plan to acquire up to a 38.1% stake in VNET Group for about US$942 million is seen as an important step in its move from battery supplier to energy partner for AI computing infrastructure.
- The report argues that tight gas turbine supply, capital expenditure from hyperscale cloud providers, and bottlenecks in grid equipment continue to support demand for power equipment.
- China auto exports, actionable policy opportunities after the 15th Five-Year Plan, securities-market turnover, and earnings from internet companies are also key focus areas in this issue.
Report interpretation
Overview
This is a JPMorgan initial research compendium on China and Hong Kong, covering Asia power equipment, AIDC energy storage, internet platforms, logistics, auto exports, securities, and China thematic strategy. The core thesis is that as China's 15th Five-Year Plan moves into public discussion and implementation, the investment question shifts from policy direction to which policies can actually be executed and how to express them through tradable assets; meanwhile, U.S. data center construction and AI computing expansion continue to reinforce investment opportunities in power equipment, energy storage, and data center infrastructure.
Core views
The most explicit views center on Asia power equipment and CATL-H. On power equipment, the sector is supported by U.S. data center capacity growth, tight gas turbine supply, hyperscale cloud capex, and grid-equipment bottlenecks, leaving order growth, margins, and demand prospects favorable. However, since the relevant Asia names are already up more than 60% year to date and strong first-quarter orders plus positive expert feedback have largely been priced in, near-term catalysts are limited and investments should be more selective. JPMorgan prefers China power equipment mid- and small-caps such as Wasion Holdings, TGOOD Electric, and Hyosung Heavy; it also believes some Korean power equipment names are expensive and may pause after recent gains. For CATL-H, JPMorgan sees its strategic investment in up to 38.1% of VNET Group as an important development in building a vertically integrated AIDC energy-storage ecosystem. Combined with its earlier sodium-ion storage orders and investment in Zhongheng Electric, CATL is evolving from a battery supplier into a strategic energy-infrastructure partner for AI computing buildout.
Analysis framework
The report combines multi-theme, multi-company quick takes with sector views: on one hand, it compiles preliminary earnings read-throughs, ratings, and target prices for individual stocks; on the other, it tests the durability of data center power-equipment demand through expert calls, views from European capital goods analysts, order trends, GPU order and efficiency assumptions, hyperscaler capex budgets, and valuation multiples. For strategy themes, it starts from the policy execution path after China's 15th Five-Year Plan was made public and looks for industry exposures that are actionable and tradable.
Methodology notes
Use GPU orders, efficiency assumptions, data center grid-connection capacity, and behind-the-meter generation demand to test whether expectations for power-equipment demand still have room to rise.
The report notes that the market expects about 200GW of data center connections, of which 100GW is seeking behind-the-meter generation, but a bottom-up analysis based on GPU orders and power-efficiency assumptions may point to even higher demand.
Judge the sustainability of orders and margins by the tightness of supply for key equipment.
The report says Siemens Energy gas turbines are essentially sold out through 2029, with 2030 orders also filling quickly; tight grid-equipment supply and operating leverage from capacity expansion may support margin upside.
When fundamentals remain strong but the market has already priced them in, shift from broad beta exposure to selectivity.
Asia power equipment companies are up more than 60% year to date on average, and strong orders plus positive commentary have already been digested by the market; the report argues for waiting for fresh catalysts such as second-quarter results and guidance revisions.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- CATL-H 3750.HKCore name in AIDC energy storage and AI computing infrastructure supply chain
- Strengths
- The strategic investment in VNET Group, together with the earlier 60GWh sodium-ion storage order and investment in Zhongheng Electric, shows that CATL is building a full-stack energy solution spanning cells, BMS, power conversion, and deployment scenarios.
- Weaknesses
- The transaction still needs to be integrated with VNET and translated into sustainable orders and profit contribution.
- Comparison
- Compared with a conventional battery supplier, the report believes CATL is upgrading into a strategic infrastructure partner.
- Risks
- Slower-than-expected AIDC buildout, intensifying storage competition, and transaction execution or regulatory approval risks.
- Wasion HoldingsPreferred China power equipment mid- and small-cap name
- Strengths
- Benefiting from data center power-connection bottlenecks and grid-equipment demand, with valuations more attractive than some Korean power equipment names.
- Weaknesses
- The report does not provide a detailed financial breakdown.
- Comparison
- Compared with high-valuation Korean power equipment names such as LS Electric, the report prefers China power equipment mid- and small-caps.
- Risks
- Insufficient order conversion, valuation re-rating already priced in, and second-quarter results or guidance falling short of expectations.
- TGOOD ElectricPreferred China power equipment mid- and small-cap name
- Strengths
- Listed as one of JPMorgan's preferred China mid- and small-cap names in Asia power equipment, and may benefit from expansion in power infrastructure.
- Weaknesses
- The report does not disclose specific earnings or order data in this excerpt.
- Comparison
- Relative to expensive Korean power equipment names, the report believes China mid- and small-cap names still offer value.
- Risks
- The sector has already risen significantly, near-term catalysts are limited, and order or margin delivery may miss expectations.
- Hyosung HeavyOne of the preferred names in Korea/China power equipment
- Strengths
- Included among JPMorgan's top picks in Korea/China power equipment.
- Weaknesses
- Some names in the Korean power equipment sector are expensive, which may cap near-term performance.
- Comparison
- The report notes that some Korean power equipment names such as LS Electric trade at more than 65x forward P/E, and the recent rally may pause.
- Risks
- Valuation correction, revised order expectations, and slower data center capex growth.
- Alibaba Group 9988.HK / BABA USInternet platform preliminary earnings coverage name
- Strengths
- The report title refers to bullish support being realized in the 4QFY26 preliminary read-through.
- Weaknesses
- It also mentions bearish pillars emerging, indicating wider divergence.
- Comparison
- One of the internet names covered in this China/Hong Kong initial research package.
- Risks
- Core business growth, cloud and AI investment returns, competition, and regulatory risk.
- Tencent 0700.HKInternet platform covered at Overweight
- Strengths
- Rated Overweight and included in the results and company-view sections of this issue.
- Weaknesses
- The excerpt does not provide detailed operating data.
- Comparison
- Along with Alibaba and TME, it is part of the internet and entertainment coverage set in this report.
- Risks
- Volatility in advertising, gaming, and fintech businesses, as well as regulatory risks.
- JD Logistics 2618.HKLogistics company covered at Overweight
- Strengths
- Listed as Overweight in the report.
- Weaknesses
- The excerpt does not provide detailed financial metrics.
- Comparison
- A company-research item within the earnings and opinion set.
- Risks
- E-commerce demand, fulfillment costs, industry competition, and margin pressure.
- Tencent Music Entertainment 1698.HK / TMEOnline entertainment company covered at Neutral
- Strengths
- The 1Q results headline suggests a more stable bottom.
- Weaknesses
- Catalysts have been pushed out, and the rating is Neutral.
- Comparison
- More neutral in tone than the Overweight internet names.
- Risks
- User growth, monetization conversion, content costs, and delayed catalysts.
- VNET GroupStrategic CATL partner and AIDC deployment channel name
- Strengths
- CATL's planned stake of up to 38.1% makes VNET a potential deployment scenario within CATL's AIDC storage ecosystem.
- Weaknesses
- It still needs to prove that the strategic collaboration can generate real commercialization and earnings improvement.
- Comparison
- In this report, VNET is seen as a key node for CATL's transition from supplier to infrastructure partner.
- Risks
- Data center demand volatility, capital expenditure pressure, and slower-than-expected collaboration execution.
- Yunnan Energy 002812.SZName related to separator industry and capacity expansion
- Strengths
- JPMorgan remains constructive on the separator industry supply-demand outlook for 2027.
- Weaknesses
- New capacity expansion may pressure the stock price.
- Comparison
- One of the Overweight names in the report's results and company-view coverage.
- Risks
- Overcapacity, pricing pressure, and slower-than-expected demand recovery.
Key data
- Average year-to-date gain for Asia power equipment companies>60%The rally has been driven by strong first-quarter orders and expectations for U.S. data center capacity growth.
- Market expectation for data center connected capacity200GWAbout 100GW of this is seeking behind-the-meter generation; the report believes there may still be upside based on bottom-up analysis.
- CATL investment in VNET GroupUp to a 38.1% stake, transaction value of about US$942 millionViewed as an important move for CATL to lock in channels for AIDC storage deployment.
- CATL-H target priceHK$725JPMorgan reiterates CATL-H at Overweight, with a Dec-26 target price.
- Projected ASEAN market share for Chinese automakersAbout 20%-25% in 2030Up from 11% in 2025, implying an incremental opportunity of roughly 400,000 to 600,000 vehicles over 2025-2030.
- Share of new-energy vehicles in China auto exports49%Based on 1Q26 data; Europe accounted for 38% of export destinations and Asia for 32%.
- China securities market average daily turnover since MayRMB 3.3 trillionMargin financing balances exceeded RMB 285 billion, and the report maintains a positive view.
- Changes in ratings, target prices, EPS, and DPSNoneThe report indicates that there were no key changes in ratings, target prices, EPS, or DPS in this period.
Impact & implications
For portfolios, the report suggests that AI data center expansion remains an important medium-term driver for power equipment, energy storage, grid equipment, and data center infrastructure companies. However, after the significant rally, sector allocation should shift from broad beta expansion toward names with better valuation, order execution, and catalyst alignment. China power equipment mid- and small-caps are more attractive, with valuations in the mid-to-high single-digit to teens forward P/E range, versus some expensive Korean power equipment names. CATL-H's VNET investment implies that the battery leader may enter the AI computing infrastructure value chain by integrating energy storage, power conversion, BMS, and deployment scenarios.
Risks
- Data center capacity construction or GPU order growth may fall short of expectations, weakening demand for power equipment and storage.
- The Asia power equipment sector has already seen substantial year-to-date gains, and valuations plus order expectations have been priced in ahead of time.
- Second-quarter results or new order/revenue guidance revisions may disappoint and become a short-term negative catalyst.
- If bottlenecks in gas turbines, grid equipment, and electrical equipment ease, upside for orders and margins could narrow.
- If CATL's strategic investment in VNET is not integrated smoothly or deployment scales come in below expectations, the AIDC storage narrative may be affected.
- China auto exports face uncertainty from destination-country policies, tariffs, competition, and local production requirements.
- This material is not intended for distribution to investors in mainland China and does not constitute securities investment advisory services in mainland China.
What to watch
- Whether second-quarter results and new order/revenue guidance from Asia power equipment companies are revised upward.
- Changes in U.S. data center grid-connected capacity, behind-the-meter generation demand, and hyperscaler capex budgets.
- Whether gas turbine and grid equipment supply remains tight.
- Approvals, closing, collaboration orders, and AIDC storage project execution progress for CATL's investment in VNET Group.
- Valuation and order conversion for preferred power equipment names such as Wasion Holdings, TGOOD Electric, and Hyosung Heavy.
- Market share gains by Chinese automakers in ASEAN and Europe, the structure of NEV exports, and policy changes.
- Whether turnover, margin financing balances, and risk appetite in the China securities market continue to strengthen.